Question: Gabriel Products accidentally overstated its ending inventory by $5,000 at the end of Period 1. Is the gross margin of Period 1 overstated or understated?

Gabriel Products accidentally overstated its by $5,000 at the end of Period 1. Is the gross margin of Period 1 overstated or understated? Is the gross margin of Period 2 overstated, understated, or unaffected by the Period 1 error? Is the total gross margin for the two periods overstated, understated, or correct? Give the reason for your answers.

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